Gold, silver and oil markets hope for better year

Prospects are bright for gold, silver, but oil’s a guessing game

SAN FRANCISCO (MarketWatch) — As the year draws to a close, oil is poised for a sizable loss, gold readies for its smallest annual gain since 2008 and commodity traders look forward to a potentially better new year.

“The commodity complex had a fairly lackluster performance in 2012,” said Elliott Orsillo, co-founder and portfolio manager at Season Investments LLC.

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For the year as of Thursday, oil futures
US:CLG3
traded nearly 10% lower, while gold
US:GCG3
tacked on about 5%. Silver
US:SIH3
gained over 6%.

The year 2012 has been one of obsession with the European Union meltdown, which didn’t happen, and monetary expansion, which did in the form of a third round of quantitative easing from the U.S. Federal Reserve, according to Christopher Ecclestone, a mining strategist at Hallgarten & Co.

“Yet both failed to provide either the downward or upward stimulus that pundits wanted,” he said. So for metals, “QE3 has gone off like a damp firecracker and not lit a fire under any metal.”

With expansion of central-bank quantitative easing, also referred to as money printing to increase the money supply, investors have bet that commodities will protect them from decreased currency value.

But that hasn’t helped so far, said Chris Mayer, managing editor of Agora Financial and editor of newsletter Capital & Crisis.

“Since peaking in the summer of 2011, most every commodity index is lower, despite massive liquidity expansion by central banks,” and that trend is likely to continue, he said.

Year to date, the Thomson Reuters/Jefferies CRB Index
XX:CRY
a commodities benchmark, is down about 3%.

Aside from gold, which he said can easily top $2,000 an ounce in 2013, Mayer was mostly bearish on commodities: “The great bull market is over, and I’ve been telling my readers to [...] reduce their exposure.”

Gold and silver appeal

Gold, in particular, had many reasons to rally, but didn’t perform as well as most analysts expected, while silver did well.

Both could do better in 2013.

Reuters

Gold and silver may see more gains in 2013.

This year, gold peaked near $1,800 an ounce in October, but failed to take out the 2011 highs of around $1,900, despite a combination of gold-price supportive factors, including euro-zone debt woes and the Fed’s quantitative easing.

“When a market should be acting bullish on bullish news yet does not, it represents a nervous condition,” said John Person, president of NationalFutures.com. And “when investors are nervous, they tend to stay out or sell, regardless what market it is,” he said.

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